Nalcor battle Underway Over Transmission Access in Quebec

Excerpts from the Montreal Gazette.

Régie studies spat between Quebec, N.L.: Question is whether Nalcor is getting fair access to transmission lines operated by Hydro-Québec

By LYNN MOORE, The GazetteFebruary 10, 2010

The countdown has begun for the province's energy board, which yesterday began hearing final arguments in a high-stakes energy dispute between Quebec and the province of Newfoundland and Labrador.

By Friday, it will be left to three Régie de l'énergie commissioners to decide a landmark case that pits Hydro-Québec against Nalcor Energy Corp., Newfoundland's public energy company, in a dispute that has multibillion-dollar consequences for both provinces and could affect their ability to access export markets.

Theirs will be a closely read ruling in the U.S. as well as Canada, energy industry experts said yesterday.

"We are talking about an area of business and enterprise (that) is highly political everywhere, in Newfoundland, in Quebec and in the U.S. and is also high-stakes in terms of economic issues, whether they be investment dollars or the price of electricity or development and jobs," said University of Alberta professor Joseph Doucet, an energy policy expert who has testified before the Régie in other cases.

Stripped of its many technical complications, the current case revolves around whether Hydro-Québec is providing - as required - fair and open access to available space on its transmission lines so Nalcor can transport power from its $6.5-million Lower Churchill project through Quebec to markets in Ontario, the U.S. and elsewhere.

Quebec's public utility - which incidentally has its own mega hydroelectric projects lined up - claims it has no available capacity. A system upgrade of about $3 billion would be required to handle Lower Churchill's 2,800 megawatts, it says.

Most chillingly, Nalcor alleges that Hydro-Québec is defying the concept of open access to transmission lines required by the Régie and by the U.S. Federal Energy Regulatory Commission (FERC).

During three weeks of hearings, a U.S.-based energy expert testifying on behalf of Nalcor, told the Régie that Hydro-Québec's "actions go beyond the natural inertia of a monopolist and instead reflect a pro-active effort to inhibit (Nalcor's) access to the grid."

Another U.S.-based energy expert, called by Hydro-Québec, disputed the findings of Nalcor's expert and insisted that Quebec's utility had correctly portrayed its network capacity to Nalcor.

Hydro-Québec has a lot riding on its position and it is playing by the book, Université Laval economist Jean-Thomas Bernard said.

"Hydro-Québec does not want to get into trouble with FERC because they don't want to have their licence to operate in the U.S. market revoked. That would be a tremendous blow," Bernard said.

Although the ruling of the board will not be binding in other jurisdictions, it will be closely followed, especially by those who may already believe that Quebec is trying go get a stranglehold on transmission capacity in eastern Canada, said John Todd, president of Elenchus Research Associates, a Toronto-based company that provides strategic advice and technical support to the energy industry.

"As we evolve a more competitive energy system (in North America), you can not produce and sell power without transmission (capacity) to get from where you are producing it to market, so anything that affects the true degree of openness ... of transmission tariffs is going to be of interest," Todd said.

In an interview yesterday, Nalcor president Ed Martin again pointed to the economic benefits of the deal Nalcor desires with Quebec. Annual tariffs to Hydro-Québec could range between $75 million and $200 million, depending on how much power Newfoundland decided it will ship through Quebec and Nalcor is willing to pay for "reasonable upgrades" to the province's existing grid.

Final arguments before the Régie panel, presided over by Jean-Paul Théorêt, continue today and are expected to conclude tomorrow.


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